Ezel / IRS Rulings / 201515029
Chief Counsel Advice 201515029 Released April 10, 2015 Advice

Section 882 deduction limit is a partner-level affected item

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This page covers one taxpayer's ruling from 2015, which can't be cited as precedent. Ezel answers your situation under the current Code and IRS guidance, with citations.

Currency note: this determination was released in 2015
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

Chief Counsel advised that the section 882 limitation on deductions is not a partnership item because the partnership does not determine it under subtitle A. It is instead a partner-level affected item, like the at-risk, passive-loss, and outside-basis limits. The IRS should disallow the deductions through an affected-item notice of deficiency under section 6230(a)(2)(A)(i). It need not first open and close a TEFRA partnership proceeding, but it remains bound by the deduction amounts reported on the partnership return before applying the partner-level limit.

Ruling snapshot

  • Question: Is the section 882 deduction limitation a partnership item, and how should the IRS disallow affected deductions?
  • Outcome: Advice given: treat it as a partner-level affected item and issue a notice of deficiency.
  • Key authorities: IRC §§ 703, 882, 6230, and 6231; Treas. Reg. § 301.6231(a)(5)-1; Roberts v. Commissioner, 94 T.C. 853 (1990).

Full text (IRS public release)

ID: CCA_2015032710120101 [Third Party Communication:

UILC: 882.03-00, 6231.05-00 Date of Communication: Month DD, YYYY]

Number: 201515029
Release Date: 4/10/2015
From:
Sent: Friday, March 27, 2015 10:12:01 AM
To:
Cc:
Bcc:
Subject: FW: IRC 882(c)(2) and TEFRA (POSTS-143012-14)

The section 882 limitations on deductions is not a partnership items because it is
not something the partnership must determine under Subtitle A. I.R.C. 6231(a)(3)
and 703.

Instead, the limitation is a partner-level affected item similar to partner
limitations on partnership deductions under the at risk (sec. 465), passive loss
(sec. 469) and outside basis limitations (sec. 704(d) rules. See Treas. Reg.
301.6231(a)(5)-1(a) through -1(d).

Consequently, the deductions should be disallowed through an affected item
notice of deficiency issued under section 6230(a)(2)(A)(i).

Under Roberts v. Commissioner, 94 T.C. 853, 860 (1990), we do not have to open
and close a TEFRA partnership proceeding before issuing such affected item
notice of deficiency. But for the purposes of the affected item notice, we will be
bound by the amounts reflected on the partnership return, before application of
the partner-level limitations on those amounts. Id. at 862.

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